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June 26, 2013

Fed’s Fisher Tempers ‘Taper Tantrum’ Talk

That appears to be the attitude of the Fed when contemplating the taper tantrum in the wake of Chairman Ben Bernanke’s awkward comments on June 19 announcing the beginning of the end for the central bank’s quantitative easing.

Richard Fisher, president of the Dallas Federal Reserve, employed his usual folksy metaphors to describe investor behavior immediately following the announcement, claiming it was fully anticipated all along.

Calling investors “feral hogs” and the markets “manic depressive,” Fisher, an outspoken critic of QE and subsequent iterations, said “he doesn’t want to go from Wild Turkey to cold turkey overnight,” an apparent reference to the measured process planned for the unwinding.

The comments, made in an interview Monday with the Financial Times, appear to be part of an effort in the past week to calm markets, which fell significantly in the wake of Bernanke’s comments. Fisher said that although QE will begin to wind down, other forms of Fed stimulus will continue.

It “made sense to socialize the idea that quantitative easing is not a one-way street”, he said, according to FT, and emphasized any such move would be done cautiously.

Fisher, a nonvoting member of the Federal Open Market Committee, said pushback to ending the program would be felt, although he did not mention from whom.

He likened the market reaction to Bernanke’s signal that the bank could begin reducing its monthly bond purchases before the end of this year to the 1992 attack led by investor George Soros on the Bank of England.

“Markets tend to test things,” Fisher told the FT. “We haven’t forgotten what happened to the Bank of England [on Black Wednesday]. I don’t think anyone can break the Fed …But I do believe that big money does organize itself somewhat like feral hogs. If they detect a weakness or a bad scent, they’ll go after it.”

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